Living Trusts Vs. Fixed Trusts: How They Differ And Why You May Prefer One Over The Other


If you are currently looking into trusts for the first time, you may be surprised to learn that there are actually several different kinds of trusts. If the trust or trusts that you want to create are meant to give money and possessions to your children, then you might want to look more closely at revocable living trusts and fixed trusts. Here is how these two kinds of trusts differ and why you may prefer one to the other.

Revocable Living Trusts

Revocable living trusts allow you to dole out your wealth and possessions to your children while you are still alive. This is a very good idea for three reasons:

  1. Your estate avoids the obnoxious process of probate after you pass away.
  2. You can share the wealth now, knowing that you cannot take it with you anyway.
  3. If your children have an argument about who gets what and why, they can come directly to you and ask why you made the decisions you did.

Additionally, you are free to revoke the terms of your trust contracts at any time. If one of your adult children passes away, becomes estranged or you disown a child, then you can revoke any and all monies and property you set up in trust for that particular offspring. You are free to change the terms of any one of the trusts that you set up.

Fixed Trusts

Fixed trusts are the kinds of trusts that many people associate with accounts and property given to offspring after parents pass away. There are subtypes of fixed trusts:

  1. Remainder trust, which is money paid in a lump sum to your beneficiaries after your death
  2. Trust for a Minor, which sets up accounts for your youngest children and provides for them after they have turned twenty-one. It may provide for them in perpetuity or until the funds run out, whichever comes first.
  3. Life interest trust, which is often combined with a "trust for a minor" because you intend for the money to last all of your child(ren)'s life/lives.

The caveat with fixed trusts is that your beneficiaries may have to pay taxes on what they receive and/or pay an inheritance tax upon your death. Some or all of "remainder trusts" may be subject to probate as well. Because this varies from state to state, be sure to check with your trust lawyers to see what particular caveats exist with regards to fixed trusts. 

To learn more, contact a trust law firm like Wright Law Offices, PLLC. 

About Me

Law Information Everyone Should Know

Hi, my name is Jessica Hawkins and welcome to my law blog. My mom and dad are both attorneys so I grew up with a lot of law talk around the house. Even though I decided not to become an attorney, I still have an interest in the law. Plus, when I visit my parents, that's all they want to talk about, so I still learn what I can about the law so that I can join in on the conversation. I wanted to create a blog to inform others about various aspects of the law. In this blog, you'll also find out about the different types of attorney specialties and when it's best to consult an attorney. I hope that you find my blog useful and that it helps to answer your law questions.

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